Trader Programme Self Quiz
This self quiz is designed to enable the trader to know whether s/he is ready to start the Blue Point Trading - Trader Programme. It is certainly not comprehensive, but will give you an idea of the level of basic competence needed to be successful at Blue Point Trading. After you have taken the quiz, the results will be given along with further instructions.
- 1.
When a country's central bank raises its core lending rate, this is usually ...
- A.
Does not have any real effect on the country's currency.
- B.
Bullish for the the country's currency.
- C.
Bearish for the the country's currency.
- D.
Resets the country's currency to the previous exchange rate.
- E.
None of the above.
Correct Answer
B. Bullish for the the country's currency.Explanation
When a country's central bank raises its core lending rate, it usually has a bullish effect on the country's currency. This is because a higher interest rate attracts foreign investors who seek higher returns on their investments. As a result, there is an increased demand for the country's currency, which strengthens its value in the foreign exchange market. Therefore, the central bank's decision to raise the core lending rate is seen as a positive signal for the country's currency.Rate this question:
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- 2.
If Bonds are going up in price this is generally ...
- A.
Bullish for stocks.
- B.
Bearish for stocks.
- C.
Depends on the underling credit default swap rates.
- D.
A signal that the central bank is ready to make a policy change in the same direction.
- E.
Has no real effect on stock values.
Correct Answer
B. Bearish for stocks.Explanation
When bonds are going up in price, it means that the interest rates are decreasing. This is because bond prices and interest rates have an inverse relationship. When interest rates decrease, it becomes cheaper for companies to borrow money, which can stimulate economic growth. However, this also means that the returns on stocks become less attractive compared to bonds, leading investors to shift their investments from stocks to bonds. As a result, the demand for stocks decreases, causing stock prices to decline. Therefore, when bonds are going up in price, it is generally bearish for stocks.Rate this question:
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- 3.
A stock buy back plan done by a public company is generally ...
- A.
Prohibited under the country's laws.
- B.
Means the company's is running low of cash.
- C.
No effect on the value of the stock.
- D.
Bearish for the stock.
- E.
None of the above.
Correct Answer
E. None of the above.Explanation
A stock buyback plan done by a public company is generally not prohibited under the country's laws, nor does it necessarily mean that the company is running low on cash. Additionally, a stock buyback plan can have an effect on the value of the stock, depending on various factors such as market conditions and investor sentiment. Therefore, the correct answer is "None of the above" as none of the statements accurately describe the general implications of a stock buyback plan.Rate this question:
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- 4.
A rise in GDP for a country is a sign of ...
- A.
An economy that is growing.
- B.
Potential inflation fears could arise due to the over heating of the economy.
- C.
Stock values could rise.
- D.
Interest rates could rise.
- E.
All of the above.
Correct Answer
E. All of the above.Explanation
A rise in GDP for a country indicates that the economy is growing, which means there is an increase in the production of goods and services. This growth can potentially lead to inflation fears because an overheating economy may cause prices to rise. Additionally, when the economy is growing, stock values tend to rise as well, reflecting the positive performance of companies. Lastly, as the economy expands, there is a possibility that interest rates may increase to control inflation and maintain economic stability. Therefore, all of the above statements are correct.Rate this question:
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- 5.
If durable good orders and retail sales fall, this is generally ...
- A.
Good for a country because it will increase job growth.
- B.
Causes GDP to fall.
- C.
Causes interest rates to go up.
- D.
Causes stock values to rise.
- E.
All of the above.
Correct Answer
B. Causes GDP to fall.Explanation
When durable good orders and retail sales fall, it indicates a decline in consumer spending and investment. This decrease in economic activity leads to a decrease in GDP (Gross Domestic Product), as it measures the value of all goods and services produced in a country. Therefore, the correct answer is that it causes GDP to fall. The other options are not directly related to the given scenario.Rate this question:
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- 6.
Correlations between stocks and bonds ...
- A.
Occur very rarely.
- B.
Occur only when central banks raise interest rates.
- C.
Occur often.
- D.
Are highly dependent on FOREX values of 3rd world countries.
- E.
Is a sign of financial stress, leading to economic down turns.
Correct Answer
C. Occur often.Explanation
Correlations between stocks and bonds occur often. This means that the prices of stocks and bonds tend to move in the same direction. When the stock market goes up, bond prices also tend to rise, and vice versa. This correlation can be attributed to various factors such as changes in interest rates, market sentiment, and economic conditions. Investors often consider the correlation between stocks and bonds when diversifying their portfolios to manage risk.Rate this question:
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- 7.
The markets in general can be considered as ...
- A.
A leading economic indicator.
- B.
A place where governments can place sovereign debt.
- C.
Companies can launch IPOs.
- D.
Large speculation can occur.
- E.
All of the above.
Correct Answer
E. All of the above.Explanation
The given statement suggests that the markets in general serve multiple purposes. They can be considered as a leading economic indicator because the performance of the markets often reflects the overall health of the economy. Governments can also place sovereign debt in the markets as a way to raise funds. Companies can launch IPOs (Initial Public Offerings) in the markets to raise capital and become publicly traded. Additionally, the markets provide a platform for large speculation to occur, allowing investors to make high-risk bets on the future performance of various assets. Therefore, the correct answer is "All of the above."Rate this question:
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- 8.
Economic reports given out by governments should be ...
- A.
Rarely listen to as they are generally politically motivated.
- B.
May not be accurate, but its the best data available and because others trade off them, we should look at them carefully.
- C.
Are generally not too important for a day trader.
- D.
Are only good if certified by your broker.
- E.
None of the above.
Correct Answer
B. May not be accurate, but its the best data available and because others trade off them, we should look at them carefully.Explanation
Economic reports given out by governments may not always be accurate, but they are still considered the best data available. Despite the potential for political motivations, these reports are important because other traders and investors base their decisions on them. Therefore, it is crucial for day traders to carefully analyze and consider these reports when making trading decisions.Rate this question:
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- 9.
Bonds will go down in value and up in terms of interest rates if ...
- A.
The question's premise is wrong. Bond values and interest rates go up at the same time.
- B.
There is a perceived risk of a default on the bond.
- C.
The central bank keeps rates steady all the time.
- D.
The question's premise is wrong. Bond values and interest rates go down at the same time.
- E.
None of the above.
Correct Answer
B. There is a perceived risk of a default on the bond.Explanation
If there is a perceived risk of a default on the bond, it means that investors are concerned about the issuer's ability to repay the bond's principal and interest. This increased risk leads to a decrease in demand for the bond, causing its value to go down. Additionally, to compensate for the higher risk, investors may demand a higher interest rate on the bond. Therefore, the bond's value goes down and interest rates go up in this scenario.Rate this question:
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- 10.
If a company announces suddenly bad earnings for its past quarter, this is a sign of ...
- A.
It depends of the PE ratio is above the central bank rate.
- B.
Dividend is likely to be raised.
- C.
It depends of the GDP report that may come out at the same time.
- D.
Company's performance has gotten worse and the stock value may go down.
- E.
None of the above.
Correct Answer
D. Company's performance has gotten worse and the stock value may go down.Explanation
The correct answer is that if a company announces suddenly bad earnings for its past quarter, it is a sign that the company's performance has gotten worse and the stock value may go down. This is because bad earnings indicate that the company has not been performing well financially, which can lead to a decrease in investor confidence and a potential decline in the stock's value. The other options mentioned, such as the PE ratio, dividend raise, and GDP report, are not directly related to the company's performance or the potential impact on the stock value.Rate this question:
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- 11.
If you are short an instrument, your position PL is positive, and you feel there is more profit to be gained, but you are worried that it might move against your positive PL position, you might want to ...
- A.
Place a market order to go short.
- B.
Place a market order to go long.
- C.
Place a normal stop order at break even.
- D.
Place a sell stop limit order, 5 ticks above the high of the day.
- E.
None of the above.
Correct Answer
C. Place a normal stop order at break even.Explanation
If you are short an instrument and your position PL is positive, placing a normal stop order at break even would be a suitable action. This order would allow you to protect your profits by automatically closing your position if the instrument's price reaches your break-even point. It would prevent any potential losses if the price moves against your position. Placing a market order to go short or long, or a sell stop limit order 5 ticks above the high of the day, would not address the concern of protecting your positive PL position. Therefore, the correct answer is to place a normal stop order at break even.Rate this question:
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- 12.
If you are short 2 contracts of an instrument, and then sell short a 3rd, to get flat you will need to ...
- A.
Sell 3 contracts.
- B.
Buy 3 contracts.
- C.
Buy 2 contracts and sell 1.
- D.
Sell 2 contracts and buy 1.
- E.
None of the above.
Correct Answer
B. Buy 3 contracts.Explanation
If you are short 2 contracts of an instrument, it means that you have sold 2 contracts that you do not own. By selling short a 3rd contract, you are increasing your short position by 1 contract. In order to get flat, which means to have no position in the instrument, you would need to buy back all the contracts that you have sold short. Since you have sold short a total of 3 contracts, you would need to buy 3 contracts to get flat.Rate this question:
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- 13.
A bracket order is commonly a position order strategy that after the initial position has been taken ...
- A.
Will have a profit target in place.
- B.
Will have a stop in place.
- C.
Has the entry price that is between the profit target and stop prices.
- D.
Can be done on both long or short positions.
- E.
All of the above.
Correct Answer
E. All of the above.Explanation
A bracket order is a position order strategy that includes multiple components. It involves setting a profit target, which is the desired level of profit the trader wants to achieve. It also includes setting a stop, which is the maximum loss the trader is willing to tolerate. The entry price is the price at which the initial position is taken, and it is placed between the profit target and stop prices. A bracket order can be used for both long (buy) or short (sell) positions. Therefore, all of the given options are correct.Rate this question:
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- 14.
GTC or "Good till Canceled" means ...
- A.
When the market closes the order is removed.
- B.
Will stay in place even if the order is executed.
- C.
Normally requires an additional commission by the broker.
- D.
Can only be done on long orders.
- E.
None of the above.
Correct Answer
E. None of the above.Explanation
GTC or "Good till Canceled" means that the order will stay in place until it is either executed or canceled by the investor. It does not get removed when the market closes, and it does not necessarily require an additional commission by the broker. It can be used for both long and short orders. Therefore, the correct answer is "None of the above."Rate this question:
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- 15.
Limit orders are orders that ...
- A.
They are the same as a market order.
- B.
Can only be done on long orders.
- C.
Places a specific price that you are willing to buy or sell an instrument.
- D.
Is the same as a stop order.
- E.
None of the above.
Correct Answer
C. Places a specific price that you are willing to buy or sell an instrument.Explanation
Limit orders are a type of order where a specific price is set by the investor, indicating the price at which they are willing to buy or sell a particular instrument. Unlike market orders, which are executed immediately at the current market price, limit orders allow investors to have more control over the price at which their order is executed. This means that the order will only be executed if the market price reaches or exceeds the set limit price. Therefore, the correct answer is "Places a specific price that you are willing to buy or sell an instrument."Rate this question:
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- 16.
A margin call means ...
- A.
Your position has moved against you to the point that you now can take additional positions.
- B.
The broker in effect will stop you out automatically, once you fund your account with additional funds.
- C.
You are a bad trader.
- D.
Your risk management strategy is working.
- E.
All of the above.
Correct Answer
C. You are a bad trader.Explanation
A margin call means that your position has moved against you to the point that you now have insufficient funds in your account to cover the losses. This indicates that you have made poor trading decisions or miscalculated the risks involved, leading to a negative outcome.Rate this question:
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- 17.
If you have an OCO (One-Cancels-the-Other) order, this means ...
- A.
A stop order that gets hit, will automatically remove the existent profit target order you may have had, relative to the original position order.
- B.
If you are short it will cancel the long.
- C.
If you are long it will cancel the short.
- D.
An order that gets filled that will disallow all potential additional orders, relative to your other positions in your portfolio.
- E.
None of the above.
Correct Answer
A. A stop order that gets hit, will automatically remove the existent profit target order you may have had, relative to the original position order.Explanation
An OCO (One-Cancels-the-Other) order is a type of order where the execution of one part of the order automatically cancels the other part. In this case, if a stop order is triggered, it will cancel the profit target order that was set for the same position. This means that if the stop order is hit, the profit target order will be removed, and vice versa. This allows traders to manage their risk and potential profits by setting both stop and profit target orders simultaneously.Rate this question:
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- 18.
Margin in a futures contract means ...
- A.
The price spread between the bid and ask price.
- B.
The market value of the underlying instrument.
- C.
The amount potential you can make on the trade.
- D.
The amount required to open a futures account at a broker.
- E.
None of the above.
Correct Answer
E. None of the above.Explanation
Margin in a futures contract refers to the amount required to open a futures account at a broker. It is the initial deposit or collateral that traders must put up to enter into a futures contract. The margin serves as a form of security for the broker and helps ensure that traders fulfill their obligations. The other options mentioned in the question do not accurately define the concept of margin in a futures contract.Rate this question:
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- 19.
At futures contract expiry, and you are long ...
- A.
You potentially could take physical delivery, if you do not sell before hand.
- B.
You must buy an option to cover the position.
- C.
You must sell an option to cover the position.
- D.
All contracts will then get paid a dividend at par.
- E.
None of the above.
Correct Answer
A. You potentially could take physical delivery, if you do not sell before hand.Explanation
If you are long at futures contract expiry, it means that you have a position where you have agreed to buy the underlying asset at a future date. In this case, if you do not sell before the contract expires, you have the potential to take physical delivery of the asset. This means that you would actually receive the asset and be obligated to pay for it.Rate this question:
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- 20.
A short put option means ...
- A.
You have risk from the put strike price to 0.
- B.
You want the underlying instrument to go up in value.
- C.
If not hedged with another position, it is often called a naked position.
- D.
You will loose money if the underlying instrument goes down in value.
- E.
All of the above.
Correct Answer
E. All of the above.Explanation
A short put option means that you have the obligation to sell the underlying instrument at the strike price. This means that you have risk from the put strike price to 0, as the underlying instrument can potentially decrease in value. You want the underlying instrument to go up in value because if it does, you will not have to sell it at the strike price. If not hedged with another position, it is often called a naked position, as you are exposed to the full risk of the option. Therefore, you will lose money if the underlying instrument goes down in value. Hence, all of the above statements are correct.Rate this question:
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- 21.
Moving Average Convergence-Divergence (MACD) is a common indicator, that ...
- A.
Some times considered a lagging indicator, as it is price derived.
- B.
Is an indicator that relates to your margin account.
- C.
Is a type of order management indicator.
- D.
Identifies the order quantity.
- E.
None of the above.
Correct Answer
A. Some times considered a lagging indicator, as it is price derived.Explanation
The correct answer is "Some times considered a lagging indicator, as it is price derived." This is because MACD is calculated based on the difference between two moving averages of a security's price. As it is derived from price data, it can be considered a lagging indicator, meaning it may not provide timely signals for entering or exiting trades.Rate this question:
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- 22.
The following chart pattern indicates probable ...
- A.
Time to sell on the positive retrenchment to move lower.
- B.
Market volatility - do nothing.
- C.
Engulfing green candle and hence a market bottom.
- D.
Head and shoulders pattern is approaching.
- E.
None of the above.
Correct Answer
C. Engulfing green candle and hence a market bottom.Explanation
The correct answer is "Engulfing green candle and hence a market bottom." An engulfing green candle is a bullish reversal pattern that occurs when a small red candle is followed by a larger green candle that completely engulfs the previous candle. This pattern indicates a shift in market sentiment from bearish to bullish, suggesting that the market has reached a bottom and is likely to move higher. Therefore, it is a signal to sell on the positive retrenchment and expect further upward movement in the market.Rate this question:
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- 23.
The following chart pattern indicates probable ...
- A.
Shooting moon pattern, get ready to buy.
- B.
Rertracement rally about to start on the next possible bid position.
- C.
Bear flag, market to move lower.
- D.
Bull flag, market to move higher.
- E.
All of the above.
Correct Answer
C. Bear flag, market to move lower.Explanation
The correct answer is "Bear flag, market to move lower." A bear flag is a technical chart pattern that indicates a continuation of a downward trend in the market. It is formed by a small consolidation or retracement after a significant downward move, followed by a continuation of the downward trend. Traders often interpret this pattern as a signal to sell or short the market, expecting further downward movement. Therefore, the answer suggests that the chart pattern shown indicates a probable downward movement in the market.Rate this question:
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- 24.
The following chart pattern indicates probable ...
- A.
Wheel pattern, market ready to go up.
- B.
Wheel pattern, market ready to go down.
- C.
Market chop, market ready to go up.
- D.
Market chop, market ready to go down.
- E.
Market chop, wait for a pattern to develop.
Correct Answer
E. Market chop, wait for a pattern to develop.Explanation
The given correct answer suggests that the chart pattern indicates market chop, which means that the market is experiencing a period of indecision or uncertainty. It further suggests that instead of making any immediate decisions, it is advisable to wait for a pattern to develop. This implies that there is not enough information or clarity in the current chart pattern to determine whether the market is ready to go up or down.Rate this question:
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- 25.
The following Scholastics oscillator indicates that a probable ...
- A.
A market rally has occurred.
- B.
Scholastics is a lagging price derived indicator.
- C.
Scholastics oscillators are not the only indicator that you should look at.
- D.
Good traders keep an open mind to new information that may come to the market.
- E.
All the above.
Correct Answer
E. All the above.Explanation
The correct answer is "All the above." This means that all of the statements mentioned in the question are true. The question implies that the Scholastics oscillator indicates a probable market rally, and it also states that Scholastics is a lagging price derived indicator. Additionally, it suggests that traders should not solely rely on Scholastics oscillators and should keep an open mind to new information in the market.Rate this question:
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- 26.
The following chart pattern indicates probable ...
- A.
Head and shoulders patterns never work, ignore the pattern.
- B.
Head and shoulders pattern broke neckline, but buy on the potential false break.
- C.
Head and shoulders pattern broke neckline, get out if you are long.
- D.
False head and shoulders pattern due to too many red bars in the chart, hold your current position.
- E.
None of the above.
Correct Answer
C. Head and shoulders pattern broke neckline, get out if you are long.Explanation
The correct answer suggests that if a head and shoulders pattern breaks the neckline, it is a signal to exit a long position. This implies that the head and shoulders pattern is a bearish reversal pattern, and the break of the neckline confirms the downward trend. Therefore, it is advisable to sell or exit the long position to avoid potential losses.Rate this question:
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- 27.
The following chart pattern indicates probable ...
- A.
Bull flag, a signal to remove all existing orders.
- B.
Bear flag, a signal to remove all existing orders.
- C.
Inverted hammer, signal to sell.
- D.
Inverted hammer, signal to buy.
- E.
None of the above.
Correct Answer
C. Inverted hammer, signal to sell.Explanation
The correct answer is "Inverted hammer, signal to sell." An inverted hammer is a bullish reversal pattern that occurs at the end of a downtrend. It indicates that the buyers are starting to gain control and a potential reversal in the price trend may occur. Therefore, it is a signal to sell as the price may start to increase.Rate this question:
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- 28.
If you just hold a short or a long position depending on the price movement below or above the 32 period moving average, you will ....
- A.
Always win your trade.
- B.
Always loose your trade.
- C.
Know what the volume indicator will do.
- D.
Understand the tick durations within the time frame.
- E.
None of the above.
Correct Answer
E. None of the above.Explanation
The correct answer is "None of the above." This is because just holding a short or long position based on the price movement relative to the 32 period moving average does not guarantee winning or losing trades, predicting the volume indicator, or understanding tick durations within the time frame. There are many other factors and indicators that need to be considered in order to make successful trades.Rate this question:
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- 29.
Scalping a market means to ...
- A.
Adjust the dividend to the moving average.
- B.
Take small tick trades, missing the overall trend.
- C.
Adjust the indicators to set up the trade environment.
- D.
Needs to be a trade weighted carefully with your overall retirement investment strategy.
- E.
None of the above.
Correct Answer
B. Take small tick trades, missing the overall trend.Explanation
The correct answer is "Take small tick trades, missing the overall trend." Scalping a market refers to a trading strategy where traders aim to make small profits by quickly entering and exiting trades, usually within seconds or minutes. This strategy focuses on taking advantage of short-term price fluctuations and does not consider the overall trend of the market.Rate this question:
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- 30.
A trading plan should NOT include ...
- A.
Stop loss points.
- B.
Profit target points.
- C.
Trade set-up trigger conditions.
- D.
The negotiated amount you are willing to pay to your broker
- E.
Win / loss ratio.
Correct Answer
D. The negotiated amount you are willing to pay to your brokerExplanation
A trading plan should not include the negotiated amount you are willing to pay to your broker because this is a personal financial decision that does not directly impact the trading strategy or execution. The trading plan should focus on stop loss points, profit target points, trade set-up trigger conditions, and win/loss ratio, as these factors are essential for managing risk and maximizing profitability in trading.Rate this question:
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